Friday 30 July 2010 03.24 EDT
First published on Friday 30 July 2010 03.24 EDT

George Osborne has delivered a rebuke to the defence secretary, Liam Fox, declaring that the costs of Britain's new Trident nuclear deterrent would come from the main defence budget.

In a sign of the Tory leadership's growing impatience with Fox, who has embarked on what Downing Street sources have dubbed "freelance" missions, the chancellor said there could be no special accountancy exemptions for the defence budget.

Speaking in Delhi, Osborne said: "The Trident costs, I have made it absolutely clear, are part of the defence budget. All budgets have pressure. I don't think there's anything particularly unique about the Ministry of Defence.

"I have made it very clear that Trident renewal costs must be taken as part of the defence budget."

His remarks will be seen as a reprimand for Fox, who has complained that the MoD was being asked to pay the £20bn costs of replacing Trident.

Fox believes that those costs should be the Treasury's responsibility, because Britain's continuous at-sea defence is a matter of national security.

The defence secretary told BBC1's Andrew Marr show on 18 July: "There has always been an understanding that the [capital] budget for the nuclear deterrent came from outside the core defence budget. Running costs for the deterrent have always come from inside.

"That is something we are discussing in the runup to the spending review. To take the capital cost would make it very difficult to maintain what we are currently doing in terms of capabilities."

There have been tensions for some time between Fox and Osborne over Trident. The Treasury regards Fox's remarks as a classic example of ministerial lobbying before a spending review.

Osborne is due to outline the tightest spending squeeze in a generation in October. One source said: "The costs of Trident have always come out of the MoD budget. We know what Liam is up to. But does he expect that the department of culture will pay for Trident?"

The MoD has been promised it will be treated more lightly than other departments in October. But these reassurances are aimed at troops in Afghanistan.

Senior Whitehall officials made it clear yesterday that if the cost of Trident has to come out of the defence budget there would be a serious knock-on effect on the rest of Britain's large weapons project.

"It will be a huge blow," said one source, who asked not to be identified.